9.7 E. Electricity

• Jurisdiction: New York

E. Electricity

For many tenants, electricity is one of the biggest operating expenses. Landlords who want to augment their revenues without quoting a higher rent often use the electricity clause as a profit center, inflating the already substantial cost for this essential service. Help your clients ensure that a building owner’s profit center does not unnecessarily increase their rent. Multi-tenant office buildings, whether central business district or suburban, typically provide that tenants will pay for electricity in one of three ways: (1) direct metering, (2) submetering, or (3) rent inclusion.

Direct metering is straightforward and may be the least costly for most tenants. When only one meter in a building connects to the utility, the tenant or its landlord may install a separate meter to measure the electricity used by a particular tenant. In this situation, the landlord pays the utility company and the tenant pays the landlord. This method, called “sub-metering,” can provide a tenant with less-costly electricity, provided the tenant knows what to ask for. If building ownership can buy electricity at low bulk rates, you should bargain for your tenant to receive the benefit of that lower rate. Landlord draft leases often say the tenant will be billed “in accordance with” a utility’s published...